MOSL: INDUSIND BANK (Buy)-Mixed asset quality-strong operating performance
​INDUSIND BANK: Mixed asset quality; strong operating performance
(IIB IN, Mkt Cap USD14.4b, CMP INR1560, TP INR1800, 15% Upside, Buy)
IndusInd Bank’s (IIB) 1QFY18 PAT grew 31% YoY (in-line) to INR8.4b. Strong loan growth of 24% YoY (in line with management guidance) and steady NIM at 4% (+3bp YoY; ~10bp higher than expected) drove robust NII performance (+31% YoY; 5% beat).
Robust NII performance, coupled with strong fee income growth of 25%+, enabled the bank to deliver impressive core PPoP growth of 29% YoY. Opex trailed total income growth, with continued moderation in employee expenses (+18% YoY v/s 17% in 4Q and average of 25%+ in the previous eight quarters).
Both corporate (+26% YoY) and consumer (+22% YoY) loans exhibited healthy growth. Lower growth in vehicle finance (+17% YoY) was compensated by strong growth of ~40% YoY in retail non-vehicle loans.
GNPAs increased 21% QoQ to 1.1% of loans (0.9% in FY17), led by high slippages in both CCB and CFD divisions. Slippages in CFD increased 45% QoQ (+62% YoY) to INR2.6b. Restructured book declined to 0.17% (-20bp QoQ), led by relapse of two accounts into NPA. There was a sale to ARC of INR570m during the quarter.
Other highlights: (1) Overall CASA ratio improved 90bp QoQ (+330bp YoY) to ~38%, led by robust SA mobilization (+65% YoY). (2) IIB has exposure of ~INR500m to three of the 12 accounts referred to NCLT for resolution. The bank holds substantial provisions here, and incremental provisions are not expected to exceed ~100-120m (may provide in 2QFY18). (3) The bank made floating provision of ~INR750m during the quarter.
IndusInd Bank's business lines include Corporate Banking, Retail Banking, Treasury and Foreign Exchange, Investment Banking, Capital Markets, Non-Resident Indian (NRI) / High Networth Individual (HNI) Banking, and (through a subsidiary) Information Technology. Co. provides multi-channel facilities including ATMs, Net Banking, Mobile Banking, Phone Banking, Multi-city Banking and International Debit Cards. Co. is part of Reserve Bank of India's Real Time Gross Settlement (RTGS) system. Co. has approximately 150 ATMs of its own, and has concluded multilateral arrangements with other banks with a total network of 15,000 ATM outlets.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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